The CSDDD (Corporate Sustainability Due Diligence Directive), approved on 24 May 2024, requires companies to assess and report their negative impacts on human rights and the environment. The EU has simplified its implementation through the Omnibus package, which modifies key aspects of the directive.
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Due diligence is a process that enables companies to identify, prevent, mitigate and account for how they address their actual and potential adverse impacts. In this post we summarise the highlights of the new European Corporate Sustainability Due Diligence Directive (CSDDD).
The CSDDD or CS3D (Corporate Sustainability Due Diligence Directive or Regulation on corporate sustainability due diligence) is based on:
Several EU member states (including France, the Netherlands and the United Kingdom) already have national ESG due diligence standards (Environmental, Social and Corporate Governance criteria). The EU-wide directive seeks to harmonise the application and frameworks of civil and criminal liability, as well as to expand efforts across the block.
This Directive, adopted by the EU Council in May 2024 after a lengthy legislative process and later modified by the EU Omnibus package, aims to enforce due diligence regarding potential or actual adverse impacts on:
The CSDDD will regulate the responsibilities of companies with regard to potential adverse impacts on human rights and the environment. Companies will no longer be required to conduct exhaustive and systematic assessments of adverse impacts within their value chains concerning indirect business partners. Full due diligence beyond direct business partners will only be required if the company has information indicating the existence or risk of negative impacts.
With the introduction of the Omnibus package, the transition plan to mitigate the effects of climate change will no longer be mandatory and will instead align with the standards set by the CSRD (Corporate Sustainability Reporting Directive).
They are required to comply with due diligence:
The scope of application of the directive is established in companies that have been incorporated in accordance with the legislation of a third country and that meet any of the following conditions:
After the Omnibus package, the 5% cap on global net turnover for sanctions is no longer established. Instead, the Commission now aims to provide guidelines and grant Member States greater autonomy in civil liability matters.
Non-EU companies will also be subject if they operate in the EU.
Third country companies included in the scope of application must appoint an authorised representative within the EU.
Even if the company falls outside the scope of the EU CSDDD, increased pressure to align operations and supply chains with ESG objectives is likely to drive similar legislation in other jurisdictions.
The Directive does not establish rules directly applicable to small and medium-sized enterprises.
Companies must identify, prevent, and mitigate negative environmental impacts, including waste management, with particular focus on hazardous waste.
Although the Omnibus package has relaxed responsibility for indirect business partners, companies are still required to monitor the environmental impact of their direct suppliers, which may include waste management practices.
Member States should:
Companies will be required to:
The approval of the Directive will mean for companies subject to this standard:
The European Parliament approved the CSDDD on 24 April 2024, and the Council of the EU gave its final approval on 24 May 2024. The directive entered into force on 25 July 2024.
Subsequently, the EU Omnibus package of February 2025 brings significant changes to the directive.Member States will have until 26 July 2027 to transpose the legislation into their national legal systems, and the requirements will begin to apply to companies based on their size.
This regulation will be gradually implemented across EU companies (and non-EU companies that meet the same turnover thresholds within the EU). After the Omnibus package, these are the dates:
In 2028, to EU companies with 5000 employees with a worldwide net turnover of more than €1500M and non-EU companies that meet the aforementioned business threshold in the European market.
In 2029, to EU companies with more than 3000 employees and a worldwide net turnover of more than 900 M€, and non-EU companies with the same turnover threshold in the European market.
In 2030, to all other companies subject to the Directive.
The CSRD provides the framework for companies to report on their sustainability performance and strategies, while the CSDDD complements this approach by requiring companies to proactively manage the risks and adverse effects associated with their operations.
Additionally, some aspects of the CSDDD, such as the adoption of climate mitigation transition plans, are being aligned with the guidelines set out in the CSRD, contributing to greater coherence and simplification in meeting sustainability obligations.
At TEIMAS, we are committed to supporting businesses in navigating their new responsibilities in response to the EU’s "regulatory tsunami."
For this reason, we have prepared a series of workshops focused on explaining the most relevant regulations on sustainability and the circular economy.
Discover all the videos in the Surfing the Tsunami of Sustainability Compliance series here.
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